FinCEN Abandons Self-Hosted Wallet and Crypto Mixing Proposals

FinCEN has officially withdrawn two proposed digital-asset rules, effectively ending a 2020 initiative focused on transactions involving unhosted wallets and a 2023 proposal targeting international crypto mixing. The withdrawals were formally published in the Federal Register on October 6, following an announcement by the agency on October 5 as part of the Trump administration’s broader deregulatory agenda. The goal was to streamline digital-asset regulations to ensure they are “fit for purpose.”

The first withdrawal pertains to the 2020 proposal, which sought to impose reporting, recordkeeping, and customer-identity verification requirements for certain transactions involving unhosted wallets. FinCEN’s notice in the Federal Register stated that the bureau will take no further action on this proposal.

Additionally, FinCEN withdrew its 2023 proposal that would have classified international convertible virtual currency mixing as a primary money-laundering concern. The agency cited concerns from comments warning that the broad definition of mixing could stifle legitimate activity and create significant reporting burdens for financial institutions. Despite the withdrawal, FinCEN emphasized that it will continue monitoring mixers for signs of illicit finance.

The October 5 announcement framed both withdrawals as part of the Trump administration’s efforts to reduce regulatory burdens and align digital-asset rules with current needs. While the proposals are abandoned, the focus on monitoring mixers for illicit activities remains a priority.